The Comprehensive Guide to

Passive Income Investing


Learn the secrets of how Paul Tracy generates over $XXX,XXX per month in passive income!

How to Become Financially Independent Through Passive Income Investing

What is Home Bias?

Home bias is a tendency to invest in companies that reside in the investor's home country.

How Does Home Bias Work?

For example, let's say John Doe lives in Canada. About 80% of his portfolio is stocks, and of those stocks, nearly all are Canadian companies. John says he doesn't invest in companies outside of Canada because he doesn't 'get' foreign companies and doesn't understand their accounting conventions.

In a philosophical sense, home bias is an extreme version of the idea of 'invest in what you know.' Though this is still good advice, investing only in one country can pose significant political and market risks.

Why Does Home Bias Matter?

Home bias is a response to a lack of knowledge about foreign investments and a resistance to the perceived 'hassle' of trading them. The consequence of home bias, however, is that the investor is not diversified properly and can be shouldering unnecessary risk. In John Doe's case, a big shift in the Canadian stock market or unfavorable news about the Canadian government can hurt his portfolio considerably more so than if he had diversified his equity holdings to include stocks of companies outside of Canada.

Ask an Expert about Home Bias

All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Home Bias.

Be the first to ask a question

If you have a question about Home Bias, then please ask Paul.

Ask a question
Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.